'Bar Rescue' Host Jon Taffer On The Top 5 Mistakes Small Businesses Make

Jenna Goudreau

Tuesday

Oct 29, 2013 at 12:01 AMOct 29, 2013 at 9:09 AM

This is part of the "Moving Forward" series offering advice to small business owners on technology, mentorship, productivity, and growth. "Moving Forward" is sponsored by Ink from Chase®. More posts in the series »

Since 2011, restaurateur Jon Taffer has attempted to turn around 53 failing businesses across America as the host and executive producer of “Bar Rescue” on Spike TV. He’s seen roaches in liquor bottles, unpaid staff, extremely high debt levels, and owners who are figuratively — and literally — drunk on the job.

While each of these owners said on air the business could survive for only another three months, Taffer says only five have since closed, giving the show an impressive success rate of about 90%. To him, that proves his business principles work. “It’s real,” he says. “Don’t just read this. Do it.”

The former business owner, who at one point owned 17 restaurants at once, has consulted on 800 businesses in his career and is the author of new business book "Raise the Bar." In an interview with Business Insider, Taffer shared the most common mistakes small-business owners make and how to avoid them.

Getting into the business for the wrong reasons.“Restaurants to me are not like children; they are businesses,” says Taffer. In the bar business, he sees too many people open a venue because they love hanging out in bars or, worse, love drinking, and not because they have the vision and experience to build a successful business. “If the motivation is to drink and hang out, you’re going to fail,” he says. “You’d save a lot of money if you just built a bar in in your basement and invited your friends over.”

Not taking responsibility for failures. Taffer says the common denominator in every failing business on “Bar Rescue” is an excuse. Business owners will blame the recession, the government, a new competitor, and even construction on their street before they will own up to their mistakes, he says. “Every morning you’ve got someone else to blame, but all of those excuses are bull. We only fail because of ourselves. The minute you take responsibility, everything changes,” he says.

Not understanding the three essentials of marketing.Business owners think too generically about marketing, Taffer says, when they should be implementing three specific marketing initiatives: new customer, frequency, and spending programs. A new customer program is one that creates first-time business and typically includes neighborhood and local business outreach. Frequency programs are special promotions designed to persuade existing customers to return more often. They are advertised in-store, through email blasts, and on social media. And spending programs aim to increase the amount of money spent each time the customer does business with you by teaching employees to upsell, special deals, and the like. “If you don’t have those three things, you’re not marketing anything,” he says.

Not staying on top of the numbers.“There’s nothing more important than staying on top of the numbers,” says Taffer. “What infuriates me when people don’t is the fact that there are POS systems that will do all of this for you.” In the restaurant business, he says managing expenses is a science and must be done minute-by-minute. Labor typically eats up between 25% and 32% of all revenue, food costs should never exceed 30% of food sales, and beverage costs should be at or below 21% of beverage sales, he says. Add occupancy costs like rent and insurance, and making a mistake with any of those numbers will seriously hurt your chances of profitability.

Not having the necessary experience or help.Restaurants have an extremely high failure rate for first-time owners. Only one out of 12 rookies succeed, says Taffer, compared to a success rate of one-in-three for second timers. That’s why he tells entrepreneurs in every industry: “You’ve got to have experience. Either work for someone else first or have a partner with experience.” He also recommends that business owners reach out to the nonprofit group SCORE, which has 13,000 members dedicated to helping small businesses succeed through education and mentorship. Free of charge, these mentors will help you secure loans, write a business plan, structure the company, and understand a balance sheet.

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